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Fixed Rate Mortgage Loans - Understanding The Basics
Fixed rate mortgages are the most common type of mortgage loan
for home buyers. With predictable payments, long term homeowners
can plan their budgets and guard against rising interest rates.
But a fixed rate mortgage is not for everyone with its higher
interest rates and a reduction in your buying power.
Fixed Rate Mortgage Features
A fixed rate mortgage features set rates, long term low monthly
payments, and low risk. Interest rates are determined during
your loan application process. Rates are set by the market. You
can also lower your interest rate by paying points up front.
This option only makes sense if you stay in your home for
several years.
Long term low monthly payments are another benefit of this type
of home loan. Over time, inflation will raise the price of
everything except your mortgage payment. As your salary
increases, your mortgage costs will also take a smaller percent
of your income.
The low risk of fixed interest rates also appeals to borrowers.
You don't have to worry about rising interest rates or a balloon
payment. You can also repay your loan early, saving money on
interest payments.
Mortgage Terms
Traditionally, fixed rate mortgages were 30 or 15 year terms.
Now lenders offer a couple of additional options. 30 year loans
are still the most popular with their low monthly payments. A 30
year loan also enables you to qualify for more than shorter
loans.
15, 20, and 40 year mortgages are also options. 15 and 20 year
loans qualify for lower interest rates, but you will have higher
monthly payments between 10% and 15% compared to a 30 year
mortgage. Shorter loans also save you interest costs, appealing
to those who want their loan paid off before retirement or their
children go to college. 40 year mortgages are less common, but
offer low monthly payments with higher interest costs.
Biweekly mortgage, as the name implies, requires half your
mortgage payment every other week. At the end of the year, you
have made an extra mortgage payment. You can have your mortgage
repaid in 18 to 19 years. Most lenders also allow you to roll
over to a 30 year term with no penalties.
Fixed Rate Drawbacks
Even with their benefits, fixed rate mortgages aren't for
everyone. Alternative mortgages enable you to borrow more than
with a fixed rate mortgage. If you move in less than 7 years,
you will also probably pay more in interest payments than if you
went with an adjustable rate mortgage. Most homeowners move
within the fist 7 years of living in a house. You are also
locked into an interest rate that could drop in the future.
A Guide to Saving for Retirement
Saving for retirement begins early, and often we can overlook important steps unknowingly. Here's a quick guide for making sure you're getting the most out of your retirement savings.
Analyze your needs sooner than later.
The step most... ...read more
Investment-Backed Mortgages
Investment-backed morgages are a
type of property loan where the buyer doesn't pay down the
balance during the term of the contract, but instead,
accumulates an investment in hopes of doing so in the future.
This type of arrangement is... ...read more
